Many of the examples and illustrations in Managerial Accounting (and even Financial Accounting) revolve around manufacturing of physical products and/or merchandising at the wholesale or retail level. But the service-based industry is the largest and fastest growing sector in the United States. In service businesses, the goal is to provide an exceptional customer service experience for the client so that they want to continue using the service. Service companies typically have no inventory or product costs, so managerial accounting is concerned with the use of labor/people and fixed assets in serving customers.

Examples of service industries include: Transportation (FedEx), Information (Facebook), Financial Services (Bank of America), Education (Allegany College of Maryland), Entertainment (The Walt Disney Company), Healthcare (UPMC), Fitness (Planet Fitness), Accounting services, Personal Care (your salon), attorneys, hotels, etc.

Your assignment:

Select a specific company which provides a service(s) to research. This company can range from a major, multi-national company to your local barber shop. Your focus will be on the managerial accounting aspects of the company.

Address each question below:

Describe the company. What type of service(s) does it provide, how many employees does it have, what form of business organization does it have (corporation, proprietorship, etc.) etc.?

2. Why do service companies need to determine the cost of their services in general, and why would this company want to know the cost of each individual service provided? Be detailed.

3. What type of costing would be appropriate for this company (Job costing? Process costing? Activity-based costing?) Explain.

4. What are the typical materials that this organization would need to use? Are these considered direct or indirect materials, and why? Give as much detail as possible.

5. What categories and types of jobs/labor are there, and are those employees salaried or working on wages? What costs associated with employees does the company have other than salaries/wages? Be specific and thorough.

6. What kind of overhead costs would this company have? Give ample detail and examples. Be thorough.